[Capucine Graby]
Stéphane Richard, Chairman and CEO of Orange Group, welcome.
[Stéphane Richard]
Thank you, Capucine.
[Capucine Graby]
You have just presented Q3 results in an unrelentingly challenging context. Your Group stands out for its very good results.
What are the quarter’s highlights?
[Stéphane Richard]
I would like to emphasise 5 highlights from this context which is still extremely difficult because of the pandemic:
First, the return to revenue growth and marked improvement in our EBITDAaL trend.
Second is the quality of Group commercial performances, driven mainly by Fibre.
Third is the strength of the wholesale trend relating mainly to co-financing in France.
Fourth is our initiative to enhance value in the organization of our infrastructure, with the creation of a Europe-wide TowerCo and two FiberCos in France and Poland.
And fifth is the announcement of the return – to be approved, of course, at the next AGM – to a dividend of €0.70 per share. This is attributable to business activity in general and to positive organic cash flow in line with our forecast for 2023.
[Capucine Graby]
What are the underlying reasons for this turnaround in revenues, and what provides the leverage?
[Stéphane Richard]
Revenues rose 0.8% in Q3, compared with –0.4% in Q2. The positive trend is clear.
The drivers of this recovery are France and Africa & Middle East, each showing strong growth and net improvement from Q2. In contrast, Europe (again including Spain) and Enterprise are still under pressure, though there is undeniably an upward trajectory in both.
This return to growth reflects excellent commercial performances as well as the remarkable adaptability of our business model, which is based on the monetization of our infrastructures in both Retail and Wholesale.
[Capucine Graby]
Let’s talk about EBITDAaL. What are the highlights this quarter?
[Stéphane Richard]
The EBITDAaL trend – down only approx. €12 million – shows a marked sequential improvement, despite the approx. €150 million impact attributable to Covid-19, of which two-thirds was due to a fall in roaming.
Over the first 9 months of the year, our EBITDAaL was in line with the trajectory announced for 2020. This is a very good performance, given the extremely deteriorated conditions we’re experiencing.
Co-financing for Fibre in France contributed significantly to this good performance. Even if we cancel out the positive effect of co-financing with the direct impact of the Covid-19 crisis, we see that the Group’s underlying performance – the “recurring” performance, if you will – remains rock solid. It is driven by the commercial performance, by the improved pricing environment in France, which is very important, and by a consistently strong trend in Africa and Middle East.
[Capucine Graby]
You have mentioned commercial performance several times. Could we return to this, as certain countries have performed especially well.
[Stéphane Richard]
Yes, and first we must talk about France, which achieved an exceptional commercial performance in Q3. The Mobile performance was the strongest since Q2 2018, and Fixed set a new quarterly record in Fibre, with 360,000 net adds. We exceeded the milestone of 4 million Fibre customers in France, though that is just one stage in our Fibre development here. Demand is actually growing because of the health crisis, with high-quality connectivity in households more critical than ever.
In Spain, despite persistently challenging competition and significant pressure, we achieved a very encouraging commercial performance. Net sales for Fixed were boosted by significant recovery in Fibre, and turned positive once again. This applies to Mobile net sales too, thanks mainly to price repositioning that we carried out last summer.
In Poland we saw record growth in the Fibre customer base, with +54,000 net sales in Q3. In addition, as I said earlier, Orange MEA returned to revenue growth of more than 5%, driven mainly by mobile data and the upturn of Orange Money.
[Capucine Graby]
Co-financing had a positive impact on your results. Can you tell us more about that?
[Stéphane Richard]
It is important to understand that co-financing - money we receive from our competitors in France - has a positive impact overall in three respects.
First, it has a positive effect on our revenues.
Second, on EBITDAal and, third, on eCapex by lowering our Capex.
This co-financing is the direct result of our exceptionally proactive and consistent policy on fiber. It’s additional income that dovetails with our plan to monetize our investments in fiber networks.
The key takeaway here, is that we expect to receive more co-financing going forward. We have already received €2.4bn and we have yet to reach half of the estimated potential, based on the assumption that our competitors will want to provide fiber to their equivalent broadband market share.
[Capucine Graby]
That brings us to infrastructure. What are the key projects at the moment?
[Stéphane Richard]
As you know, we are working on two infrastructure projects: the creation of TowerCo for Europe, and FiberCos that we want to set up in France and Poland.
On the TowerCo side, we have made fast progress on the carve-out, which means that when we release our 2020 results in February 2021, we can give the market details on the scope of the TowerCos, the KPIs, and the governance structure we are going to build for this entity.
As for FiberCos, we are moving fast to choose a 50% partner for Orange Concessions, which is the vehicle we’re creating for the PIN area in France which will receive 4m lines. And in Poland, we will create a FiberCo with 2.4m lines.
For both, we expect to start signing agreements and commissioning the structures in the 1st half of 2021.
[Capucine Graby]
What makes you so confident about reverting to a 70cts dividend?
[Stéphane Richard]
First, the quality of our Q3 results we just discussed, which gives us total confidence in our estimated organic cash flow for this year, and also the drive and dedication of management, starting with me. This is why the question of reverting to the initial dividend is important. And also why I went to the Board of Directors, who accepted my proposal to revert to the dividend of 70cts per share from 2020.
[Capucine Graby]
Any last words in conclusion?
[Stéphane Richard]
As I do every year - except that today it is perhaps even more legitimate and resonant -, I would like to pay special tribute to all the Group’s teams, in France and around the world. They have unfalteringly served our clients, our shareholders, and have come together despite tremendously difficult circumstances these past few months due to the health crisis that is running rampant worldwide. They truly deserve our gratitude and admiration.
In the months ahead, my priority will be to maintain our teams’ motivation, but also to ramp up the implementation of our Engage2025 plan, and our transformation efforts as a whole. I am committed to keeping Orange Group on a path of sustainable growth. It has everything in its power to do so, and we will succeed while standing by our responsibility – namely our social responsibility which is especially important in these difficult times.
[Capucine Graby]
Thank you very much Stéphane Richard.
[Stéphane Richard]
Thank you Capucine.
